Understanding the college financial aid award

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As a public service to residents, the Financial Planning Association of San Diego is answering financial questions for readers of The San Diego Union-Tribune. Today’s question — on understanding the components of your financial aid award — is answered by Deborah Fox, founder of Fox College Funding in San Diego.

High school seniors are entering the final lap of the college admissions race. By now every parent of a college-bound student knows there are two sides to the equation: the offer of admission and the offer of financial aid. Here are the questions parents are asking about how to decipher the financial aid award letters they are receiving.

Q: Should we expect a financial aid award letter from every college my child applied to?

A: No. You will only receive a financial aid offer from the colleges from which your student receives an offer of admission. You would have also needed to list those colleges on your financial aid applications when you submitted them in order to receive an award. (This would have included the FAFSA and then possibly the CSS Profile and any required school-specific financial aid application.)

Q: What should we do if we haven’t yet received any financial aid award offers?

A: There could be one of two reasons you haven’t yet heard anything from a particular college’s Financial Aid Office (assuming you filed the FAFSA and any other financial aid forms each school required). Either the school hasn’t yet sent out its financial aid offers or you haven’t submitted all the requested documentation the school needs to finalize your family’s financial aid package. Contact the college to find out what’s missing. For instance, many times a college will require a copy of your W2 forms and your newly completed 2010 tax return before you will receive your award.

Q: What should we expect to see on a financial aid offer?

A: Unfortunately, there is now no standard format that colleges use to list the components of a financial aid offer. This is confusing for students and parents, and can make it difficult to compare offers. There are basically two components to an award letter: Gift Aid (free money) in the form of grants or scholarships, and self-help, which is comprised of loans and/or work-study.

Naturally, families like grants and scholarships the best, because it’s free money that doesn’t have to be paid back. These awards can come from the federal or state government or from the college itself. A Pell Grant is a federal grant; a Cal Grant comes from the California Student Aid Commission. A scholarship or grant from the college may simply be named “University Grant” or include the name of the college.

Almost all financial aid offers will include at least one loan. There are two student loans you may see: the Perkins loan or the Stafford loan. The Stafford loan may instead be listed as a “direct” loan, as it originates directly from the federal government. The Stafford loan will typically also include the word “subsidized” or “sub” for the need-based version and “unsubsidized” or “unsub” for the non-need-based version. Although rare, in some cases a college will provide its own loan at an attractive interest rate.

The parent loan will be listed as “PLUS loan,” which really isn’t financial aid since almost any parent can take out this loan, but colleges use it to fill in the gap between the cost of attendance and any other financial aid listed to make it look like they covered the full cost of attendance.

Work study is the other component you might see on your award letter. This enables your student to work off some of his or her tuition and fees.

Q: Do we have to accept every part of our financial aid package?

A: No, you don’t. You can accept or decline each component separately. For instance, you can accept the scholarship offers and decline the loan components. Tip: Don’t wait until your child chooses the final college to accept your financial aid offer. You can accept the offers from all the colleges that are still under consideration to lock in that offer. If your student doesn’t end up choosing the college in the end, the offer is terminated by the financial aid office.

Q: Is there anything we can do if we are disappointed by the financial aid offer from a particular school?

A: Possibly. First, find out what the history of that college’s financial aid offers

(collegeboard.com offers some good information). If your offer is much below the college’s average award, it may be worth appealing the offer. An appeal is a request made to the college to see if it will “bump up” the financial aid award. If you have a better offer from college choice No. 2 or No. 3, you should include a copy of that offer with your appeal letter. Sometimes an appeal works.

Important: An appeal should only be attempted at your student’s first-choice school. It wouldn’t be ethical to have a college’s financial aid office rework your aid package if your student intends on attending another college, which could prevent another student — who had chosen this school as his or her first choice — from receiving a more generous package.